The delivery arm of Alibaba Group Holding announced plans to expand its reach across China by establishing a larger network is establishing delivery hubs centered around five of China’s largest cities, Bloomberg reported late last week (June 26).
As the eCommerce giant continues building out warehousing in the U.S. and elsewhere to grow its global presence, it has big plans to boost the scale of its reach at home as well.
Alibaba owns 48 percent of Zhejiang Cainiao Supply Chain Management, which is leaning toward a future IPO to help fund the expansion, President Judy Tong said Friday in Hangzhou, China, Bloomberg reported.
The two-year-old company plans to grow its network to additional countries, including the U.S., in order to complement current global bases.
“We will definitely conduct an IPO in the future,” Tong told Bloomberg. “There is no delivery company that covers the entire nation, providing services to all merchants.”
The new Chinese delivery centers will support the growth of a rural network over the next three years, as well as serve external clients and various eCommerce sites, Tong added.
According to Bloomberg, the hub outside of Beijing will span 200,000 square meters (2.2 million square feet), making it significantly bigger than some of the fulfillment centers Amazon is known for.
The delivery centers are expected to help support Alibaba’s continued expansion, specifically into the countryside but also abroad.
“China’s underdeveloped logistics network is undermining users’ shopping experience on Alibaba,” Tong said. “What we focus on is what the delivery companies themselves can’t do.”
But with this big move, the company may face challenges in efficiently serving the increase in its geographic coverage area.
Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP, told Bloomberg, “the essence of Cainiao’s business is an information platform that leverages its strength in traffic and data.”
“One of the challenges it will be facing is that because it doesn’t handle operations itself, user experience could be affected,” Muzhi added.
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